GlobeSt.com UPDATE: FelCor Takes $15-Mil Hit in Killed Merger

IRVING, TX-FelCor Lodging Trust Inc. of Irving, TX is taking a $15-million hit by bailing out of its $2.7-billion takeover of Washington, DC-based MeriStar Hospitality Corp. It’s too early to tell, GlobeSt.com has been told, but for now FelCor isn’t adjusting its third-quarter estimate because of the loss nor saying “when or if” the merger will be resurrected.

The plan was scuttled as soon as per share prices fell below an $18.40 benchmark drafted into the merger agreement, FelCor president and CEO Thomas J. Corcoran Jr. tells GlobeSt.com. Stock for both companies was trading above $19 per share Sept. 17 and fell the following Thursday to $12 for FelCor and $9 for MeriStar. The plummet immediately killed the plans. “At this time, we are focused on our own respective companies,” says Corcoran. MeriStar’s management foothold on FelCor’s 112 hotels is not affected by the decision.

The $15-million loss comes from putting together a $700-million credit line that is no longer needed. J.P. Morgan Securities Inc. and Deutsche Banc Alex orchestrated the credit line with Bank of America, Salomon Smithy Barney Inc. and Wells Fargo Bank National Association. There is no cause for alarm since FelCor has drawn down only $40 million of its existing $615-million credit facility, according to Corcoran.